Information Centre

For hardworking employees, receiving a year-end bonus or double pay after a year of hard work is undoubtedly a welcome reward. Many may consider treating themselves to a big meal or a vacation to celebrate. However, you could also consider using this "reward" to benefit your future.

We always encourage employees to make MPF voluntary contributions in addition to the mandatory contributions to enhance their retirement protection. MPF tax-deductible voluntary contributions (TVC), which are a type of voluntary contribution, encourage employees to make additional contributions to their MPF accounts while enjoying tax incentives. TVC offer high flexibility, allowing employees to make contributions with flexible contribution periods and amounts, and to adjust their contribution level frequency according to their needs. TVC account holders can even suspend or restart the contributions as needed. 

If employees would like to utilize their year-end bonus or double pay for a TVC, they can first open an account in any MPF scheme that offers TVC and contribute directly to the selected MPF scheme without having to make any arrangements through their employer. And remember, starting to save and invest earlier means a longer accumulation period, which will result in a more significant compounding effect.

According to the MPF Ordinance, both employees and employers are required to make mandatory contributions to the MPF accounts based on 5% of relevant income, which includes any wages, salary, leave pay, fees, commissions, bonuses, gratuities, perquisites and allowances. Therefore, in addition to monthly salaries, year-end bonuses or double pay are considered to be "relevant income" and must be included in MPF calculations and deductions.

There are limits set for mandatory MPF contributions. The maximum relevant income level for MPF contributions is currently $30,000, with a monthly contribution cap of $1,500. If your monthly income exceeds $30,000, even if you receive a year-end bonus or double pay, your MPF contribution for that month remains $1,500. However, if your monthly income is below $30,000, your MPF contribution should increase accordingly at a 5% rate if you receive a year-end bonus or double pay. You can check the contribution records provided by your employer to see if the MPF contributions have been made for your year-end bonus or double pay.

Some companies arrange year-end celebrations or hold lucky draws, which may include cash or cash vouchers. Since they are distributed through lucky draws and are not rewards earned through work, they do not fall under the definition of "relevant income", so they do not require MPF contributions from employees.